Inflation and higher VAT and income tax payments are driving a sharp rise in Spain’s tax revenue, well ahead of real economic growth. Economic analyst Marc Vidal has warned that this apparent strength may conceal deeper weaknesses.
Vidal said on 'Herrera' in COPE that the numbers don’t add up. Spain’s economy is set to grow by 2.4% this year and 1.9% next year, while VAT and IRPF tax collections are rising by about 10%. The government’s income is growing four times faster than the economy itself, allowing Spain to cut its deficit without officially raising taxes. Recent reports from the OECD and BNP Paribas support this picture. Official forecasts put Spain’s GDP growth at 2.6% in 2026 and 1.8% in 2027, with inflation expected to remain high at 3.7% and 3.4%, respectively. That means tax revenue will continue to outpace real growth.
In July 2026, Spain’s public debt fell below 100% of GDP for the first time since the pandemic, reaching 99.9%, although in absolute terms it remained around 1.744 trillion euros.
But these numbers don’t tell the whole story. Vidal points out that inflation, likely to hit 3% this year, is pushing nominal GDP up by more than 5%. This makes Spain’s debt-to-GDP ratio look better on paper, but the improvement is mostly statistical. As Vidal put it, “The denominator gets fatter with inflation.” Spain isn’t really paying down its debt; the numbers look better because prices are higher. BNP Paribas analysts agree, saying the drop in Spain’s debt ratio is mostly a side effect of inflation, not a sign of real progress.
Population growth is also changing the picture. More people are working and spending, lifting total output. But Vidal warns that the workforce is growing faster than new jobs are being created. “The cake is bigger because more people are sitting at the table,” he said. Each person’s slice, measured by GDP per capita, isn’t keeping up. For many Spaniards, good economic news doesn’t mean bigger paychecks. Labor market data shows Spain’s unemployment rate has fallen below 10% for the first time since 2008. Still, the number of people looking for work is rising faster than the number of new jobs. Crónica Vasca and the OECD have both highlighted this trend.
Spain’s jobless rate is now under 10%, European funds are still coming in, and the deficit has stayed at 2.4% for two years. These are real achievements. But Vidal’s warning stands: he says this moment, which looks like Spain’s best in years, is also its most fragile. The pillars supporting growth are a larger population and inflation-fueled tax revenue, alongside strong tourism and temporary European money. Each is shaky.
OECD analysts emphasize that Spain's strong growth is largely driven by domestic demand, but they also warn of persistent inflationary pressures and the risk of price overheating in the coming years.
If any of these supports weaken, trouble could come fast. Recent events show how quickly things can change. For example, as reported earlier, weather disruptions in Catalonia revealed hidden risks beneath a calm surface.
Vidal argues that Spain’s economy is leaning on short-term boosts instead of building lasting strength. The numbers look good now, but that could change when inflation and population growth cool, or European funds run out. Policymakers and citizens face a clear choice: look past the headline numbers and focus on the quality of growth. Otherwise, the risks below the surface could become impossible to ignore.
